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In focus today

In the US, the Fed's preferred measure for inflation, the PCE, is due for release for January. While the earlier CPI showed a notable uptick in inflation pressures at the beginning of the year, the components from CPI and PPI that feed into the PCE indicated a more modest rise in the latter.

Today, we receive February inflation data from Germany and Italy.

A bunch of Swedish data released at 08.00 CET today. Retail sales for January, where we would not be overly surprised to see a setback following the strong December figure. The Swedish National Mediation Office also publishes data on Swedish wage developments up until December 2024. But most interestingly, we can summarize the Swedish growth year of 2024 as we receive the final piece to the puzzle, namely the Q4 figure. We expect +0.4% in Q4, which would result in yearly GDP growth of 0.6% for 2024, aligned with our December Nordic Outlook forecast.

Economic and market news

What happened overnight

In Japan, Tokyo CPI inflation for February was slightly below expectations, with CPI excl. fresh food printing 2.2% y/y (cons: 2.3%, prior: 2.5%). While this marked a slowdown for the first time in four months, the downtick mainly reflected revived energy subsidies. Hence the underlying trend remains unchanged with high food prices. The Tokyo CPI is normally a leading indicator for national CPI data, suggesting some potential downside risks when the February report is released late March. All in all, the measure remains above the central bank's 2% target, supporting our view of further rate hikes by the BoJ. Speaking of BoJ, deputy governor Uchida stated that the central bank will keep tapering its government bond purchases despite recent rises in yields. Uchida also reaffirmed BoJ's readiness to hike rates if data evolve as projected.

What happened yesterday

In the US, tariffs were in the limelight, as Trump announced that the proposed tariffs on Mexico and Canada will come into effect on 4 March as scheduled, while announcing an additional 10% tax on China. This naturally led to USD-strengthening against CAD, MXN and CNH, but the overall market reaction was relatively muted, indicating that markets may be waiting for actual implementation of the much-discussed tariffs. The rhetoric was relatively mild toward the UK, as Trump said that the UK could escape levies if the two countries agree on a trade deal after meeting UK PM Starmer yesterday.

Data-wise, yesterday was somewhat of a nothing burger, as the second estimate of Q4 GDP remained unchanged from the flash release with no meaningful revisions in the details, and initial jobless claims and continuing claims showed no major surprises. Similarly, the overall signals from Fed speak did not rock the boat, as Harker (hawk and non-voter) and Hammack (hawk and non-voter) emphasized that the Fed should keep the policy rate at current levels. Schmid (hawk and voter) pointed out that the Fed should stay on its toes amid the rise in inflation expectations, while also noting looming growth concerns. Looking ahead, we believe that the Fed will be on pause in March and May, though we think the cutting cycle is far from over.

In the euro area, credit growth for January ticked up to 1.3% y/y from 1.1% y/y in December. The increasing credit growth should support the economy and shows that the recent easing of monetary policy is starting to affect the economy. While the ECB's Schnabel argues that the rising credit growth is a sign that monetary policy might not be restrictive anymore, we continue to believe that monetary policy is restrictive. As such, we expect the ECB to cut the policy rate below 2% as the growth rate in credit remains very low in yearly terms and highlight that recent momentum in the credit impulse has flatlined in recent months. For more details on our expectations for the ECB, please see ECB Preview - A cut is the easy part, 28 February.

In Spain, headline inflation for January was held up by energy prices as expected. Conversely, core was weaker than consensus declining to 2.1% y/y (cons: 2.3%, prior: 2.24%). The February report affirmed the trend seen in the recent months, namely that energy inflation is holding up the headline figure, while the core measure is much softer. On Monday, we expect euro area inflation to decline to 2.3% from 2.5% and core inflation to 2.5% from 2.7% due to lower energy and services inflation. The Spanish data suggests some small upside risk to the headline figure amid high energy inflation, but we will know more when we get French and German inflation today.

In Sweden, the NIER economic tendency indicator decreased marginally in February to 97.1, indicating somewhat subdued sentiment. Price plans rose, mostly driven by food prices. The consumer confidence indicator fell by 3.3 units to 95.0, showing weaker sentiment than usual. While we did not expect this after the high PPI figures and last week's high inflation print, food prices are the main driver, yielding some comfort.

In Norway, the LFS-unemployment rate (trend adjusted) was 3.9% in January, unchanged from the revised December figures. This confirms our expectation that the labour market remains relatively tight even though growth in employment seems to have slowed. As always, we put more emphasis on the NAV-figures, where February numbers are due this morning. Also, Norges Bank's Expectations Survey has been postponed to today.

Equities: Risk-off was the story yesterday. We have been surprised by how isolated the sell-off has been to the US but this time selling took place in Europe and Asia as well. Trump 2.0 policy is an easy excuse for the pullback. While markets have so far viewed tariff threats as a negotiating tactic, it is not completely immune to the volatility. Stoxx 600 dropped -0.5%, led by the auto sector that slid -4%. Asian markets reacting more harshly with most Asian markets <-3% this morning. However, tech sell-off is just as much to blame for the big market moves. Despite the strong Nvidia report, the stock plunged almost -10% yesterday. This is rather a reflection of high US valuation getting questioned which is more of a rotation story than a risk-off story. US futures are little changed this morning.

FI: President Trump's announcement of tariffs on Mexico, Canada and China will take effect next week sparked renewed downward pressure on global yields yesterday. The 10Y US Treasury yield is now trading very close to our 12M target of 4.20%, while the Fed Funds terminal rate pricing is moving closer to 3.5%. EGB yields fell a couple of basis points across the curve, while Bund ASW spreads saw a bit of reversal of the past week's downward trend.

FX: The USD rallied broadly yesterday after US President Trump confirmed upcoming import tariff hikes on Canada, China and Mexico. Of noticeable moves, EUR/USD fell towards 1.04 and EUR/SEK rose close to 11.19.

Daily Pivots: (S1) 0.9332; (P) 0.9374; (R1) 0.9397; More....

EUR/CHF's break of 0.9359 support revives the case that corrective rebound from 0.9204 has completed after rejection by 0.9481 fibonacci resistance. Intraday bias is back on the downside for retesting 0.9204 low. On the upside, though, break of 0.9414 resistance will mix up the outlook again and turn intraday bias neutral.

In the bigger picture, sustained trading above 38.2% retracement of 0.9928 to 0.9204 at 0.9481 should confirm that whole fall from 0.9928 has completed at 0.9204. Further rally should then be seen back to 61.8% retracement at 0.9651 and above. However, another rejection by 0.9481 will keep outlook bearish for extending larger down trend through 0.9204 at a later stage.

Daily Pivots: (S1) 1.6621; (P) 1.6654; (R1) 1.6709; More...

Intraday bias in EUR/AUD stays on the upside for retesting 1.6800 resistance. Break there will resume the rise from 1.5963 to 61.8% projection of 1.5963 to 136800 from 1.6355 at 1.6872. Sustained trading above there should bring upside acceleration to 100% projection at 1.7192, which is close to 1.7180 high. On the downside, below 1.6597 minor support will delay the bullish case and turn intraday bias neutral first.

In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

Daily Pivots: (S1) 0.8238; (P) 0.8256; (R1) 0.8271; More...

Intraday bias in EUR/GBP remains on the downside as fall from 0.8472 is in progress for retesting 0.8201/21 key support level. Firm break there will carry larger bearish implications. For now, risk will stay on the downside as long as 0.8304 resistance holds, in case of recovery.

In the bigger picture, the medium term down trend remains intact with EUR/GBP staying well inside the falling channel. Prior rejection by 55 W EMA (now at 0.8431) also affirm bearishness. Decisive break of 0.8201/8221 support zone will resume whole down trend from 0.9449 (2020 high) and carry larger bearish implications.

Daily Pivots: (S1) 155.21; (P) 156.22; (R1) 156.77; More...

Intraday bias in EUR/JPY is back on the downside with break of 155.72 support, and deeper fall should be seen to 154.40 key support. Firm break there will confirm resumption of whole decline from 175.41 and target 152.11 fibonacci level next. On the upside, above 157.29 resistance will turn intraday bias neutral again first.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction. Next target will be 100% projection of 175.41 to 154.40 from 166.67 at 145.66.

Daily Pivots: (S1) 188.20; (P) 189.15; (R1) 189.73; More...

Intraday bias in GBP/JPY remains neutral for now, and risk stays mildly on the downside with 193.04 resistance intact. On the downside, firm break of 187.04 will extend the fall from 199.79 towards 180.00 support. That will also raise the chance that correction from 208.09 is resuming downward.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 1.0365; (P) 1.0430; (R1) 1.0462; More...

EUR/USD's break of 1.0400 support suggests that consolidation from 1.0176 has already completed at 1.0527, ahead of 38.2% retracement of 1.1213 to 1.0176 at 1.0572. Intraday bias is back on the downside for retesting 1.0176/0210 support zone. Firm break there will resume whole decline from 1.1213. For now, risk will stay on the downside as long as 1.0527 holds, in case of recovery.

In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

Daily Pivots: (S1) 148.98; (P) 149.57; (R1) 150.39; More....

Intraday bias in USD/JPY remains neutral and further decline is expected with 150.92 support turned resistance intact. Current fall from 158.86 is seen as the third leg of the pattern from 161.94 high. Below 148.55 will target 61.8% retracement of 139.57 to 158.86 at 146.32 next. On the upside, however, break of 150.92 will indicate short term bottoming and bring stronger rebound.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.2569; (P) 1.2630; (R1) 1.2663; More...

GBP/USD's break of 1.2602 support suggests that a short term top is already formed at 1.2715, on bearish divergence condition in 4H MACD. Intraday bias is back on the downside for near term channel support (now at 1.2424). Firm break there will argue that whole rebound from 1.2099 has completed as a correction. On the upside, though, break of 1.2715 will resume the rebound to 1.2810 resistance next.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

Daily Pivots: (S1) 0.8953; (P) 0.8980; (R1) 0.9023; More…

Intraday bias in USD/CHF remains neutral for the moment. On the upside, firm break of 0.9053 resistance will suggest that corrective pattern from 0.9200 has already completed. Further rally should then be seen to retest 0.9200 resistance. In case of another fall, downside should be contained by 38.2% retracement of 0.8374 to 0.9200 at 0.8884 to bring rebound.

In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.